EU summit: Leaders agree long-term spending plan of €960 billion

After more than 24 hours of negotiations, the leaders of the European Union’s 27 member states have agreed a €960-billion spending plan for the Union’s next budget cycle – the first time in the Union’s history that a multi-annual budget is lower than the one preceding it.

The 2014-20 spending plan is down €35bn from the current multi-annual budget, for 2007-13. The biggest cuts – both relatively and in absolute terms – have been made to direct payments from the EU’s agriculture spending (cut by €58.8bn, or 17.5%) and to regional spending (cut by €29.7bn, or 8.4%). The biggest increase has been to competitiveness spending, which is up €34.1bn (37.3%). The EU’s administration spending increases by €4.5bn (8%).

The deal is also lower, by around €13bn, than a proposal made by Herman Van Rompuy, the president of the European Council, at a failed budget summit in November. The main cuts from the November proposal were made to the European Commission’s Connecting Europe Facility for cross-border infrastructure, which was reduced from €41bn to €29bn, and to the Union’s administrative spending, which was cut by €1bn.

Both François Hollande, president of France, and Chancellor Angela Merkel of Germany welcomed the deal and stressed that it was a deal agreed by all 27 member states.

David Cameron, UK prime minister, said: “I asked for at best a cut, at worst, a freeze. That is what I’ve achieved today.”

In a move that is certain to anger the European Parliament, whose consent to today’s deal is required for it to become binding, the leaders lowered the ceiling for payments – provisions for actual transfers – to €908.4bn. This prompted Martin Schulz, the president of the European Parliament, to predict that MEPs would not approve the budget, and to describe the deal as an “unbelievable deceit”. Schulz and other MEPs believe that this sets the Union on course of fiscal deficits, which are not allowed under the treaty.

The leaders made two concessions to the European Parliament: they included a clause that allows a review of the spending plan after two years, and they agreed to a degree of flexibility in shifting unused funds between years and budget headings. Both of these provisions have been left undefined and are to be fleshed out in negotiations with MEPs.

The leaders also agreed a €6bn youth employment initiative, with half the funding to come from the European Social Fund. Regions with more than 25% youth unemployment will be eligible for support.

The deal also contains special allocations for specific regions – €710 million for Germany, €1.6bn for Hungary, €900m for the Czech Republic, €133m for Belgium and €75m for Slovenia.

Assessments

François Hollande, France’s president, gave a positive but muted response to the budget deal, describing it as “the best deal that could be agreed by 27 member states”. He said that France had achieved three of its four headline goals: protecting the Common Agricultural Policy, defending the Cohesion Policy, and ensuring that EU-level social-protection programmes are protected and developed.

It is perhaps nobody’s perfect budget but there is a lot in it for everybody

His fourth goal, he said, had been to limit the rebates given to some net contributors, to compensate them for the transfers they make to other EU countries. On this, he said that he would have liked to go further than the leaders were willing to go. He warned the UK to “bear in mind when it asks for the EU treaty to be amended” that its rebate is enshrined in the treaty.

Merkel said that the result of the marathon negotiations had been worth the wait. She said that the deal was important for growth and jobs in the EU, respected the need for fiscal consolidation and increased the fairness of contributions. In line with economic improvements, she said, Germany and the UK would contribute somewhat more to the EU budget than they are in the current cycle.

She said that she had succeeded in keeping the overall ceiling for commitments – pledges for future payments – at 1% of EU gross national income, or €960bn. Such low ceilings, she said, justified allowing more flexibility to shift appropriations between years and budget headings. In effect, she confirmed, unused but committed money will at the end of the budget year no longer be transferred back to the member states but rolled over into the following year. She said that this concession had not been easy for Germany.

She said that the leaders had succeeded in mobilising additional funds for research and development, competitiveness, student exchanges and cross-border infrastructure.

Cameron said that the budget “will encourage research and development, help eastern European countries who joined after the Cold War, and reduce the share of the budget taken up by the Common Agriculture Policy”.

He said that he had “fought off attempts” to cut the UK’s rebate. “The British rebate is safe,” he said.

José Manuel Barroso, the president of the European Commission, said that the Commission would have preferred a deal closer to its proposal of €1,033bn in commitments. But he recognised that the political deal achieved at the summit “was the highest possible level of agreement that the heads of government could reach at unanimity”.

He said that the deal was not perfect but offers a basis for negotiations with the European Parliament.

Barroso also said that the EU kept its commitment to development aid and humanitarian aid – focused, he said, on the poorest countries. However, the deal cuts development aid by €3.3bn, or 11%, from the Commission’s proposal. Van Rompuy said: “Our support for the most vulnerable people remains intact.”

Van Rompuy declared himself satisfied with the result which showed, he said, a sense of collective responsibility. “It is perhaps nobody’s perfect budget but there is a lot in it for everybody.”

“I am satisfied that all along this negotiation we kept the bigger picture in mind,” Van Rompuy said. “Even in such difficult economic conditions. We have managed to keep the essential features of continuity and of growth.”